Only certain types of cases require the court's approval for a settlement. Typically, these are class actions, domestic relations cases involving the division of debt/assets and child custody/support, civil rights cases – especially under 42 USC sec. 1983 – whereby the court will often need to approve and oversee consent decrees, certain suits brought by the attorney general on behalf of, and inter-pleading a consumer, and especially any civil action where the plaintiff is a minor, as well as a handful of other less common types of cases.
1) How do I know if the court needs to approve a settlement? (For example, a civil case in New Jersey)
If there is an attorney involved, they will let you know. Also, depending on jurisdiction, your scheduling order may say something like "any settlements in compromise require court approval and a hearing on same." (I saw NJ: When I say jurisdiction, I mean this can differ between state and federal court.) If there are no lawyers involved and you're not sure, when the stipulation of dismissal is sent to the court, they will let you know that the agreement requires court approval and the case will not be dismissed until this occurs.
This is, in the grand scheme of things, highly atypical. Generally, in a non-domestic civil matter that is not a color of law claim (alleging a government actor violated your civil rights), the court is not party to your settlement agreement.
2) What is the process? Who reads it and what do they look for?
In the cases when it is necessary, the court will review the settlement agreement. The process is simple: just a quick hearing where the judge will have already read the agreement (because it will be required to be submitted prior to the hearing) to be sure that it is fair and equitable. The types of cases that typically require court approval are specifically those types wherein one party is seen to be in a position of disadvantage (or in a divorce case, because often they use a mediator so the court needs to review it and ask the parties if they agree, also to advise them of their rights, to make sure child support is calculated correctly, and to make sure one party is not coerced into giving up visitation in exchange for monetary relief).
The court will go over the terms of the agreements in these specific matters, and will then ask each party if they realize that they are forever waiving their right to seek further relief, or mount a defense, and that their case will be dismissed with prejudice.
3) If the settlement is approved by a court, how big is the discrepancy between a contract that is approved by the court and one which can later be deemed non enforceable? From what I read on the internet, a contract should not forbid someone from reporting a crime, but my contract explicitly forbids me from making any complaint with the Attorney General.
I cannot really comment on what your agreement states with regard to reports to the AG. If it was a whistleblower claim, they can bar you from bringing a suit under whistle blower protections if you are settling that claim, or can require a confidentiality agreement and not to file charges for crimes where you were the victim and you are being compensated civilly, but it cannot bar you from filing a criminal complaint that you have a duty to report, and certain things are not able to be contractually controlled.
Whether you are Plaintiff or Defendant, I hope you have a lawyer if you are entering into a settlement of a civil suit that arose from the commission of a crime. This is getting into murky area and I would need specific facts and need to give you specific legal advice to answer this question. HERE IS A LINK to an article on this issue; whether or not it will be relevant I cannot guess.
4) Is there a reason the process should take over a year? We had both signed and dated a settlement agreement. Over a year later I was applying for jobs, and was trying to explain to potential employers that "well, if you do look me up in the ACMS this case is active but we signed the contract over a year ago." Needless to say, I didn't get any offers.
No! If your case was settled over a year ago, your case should be dismissed by now. That is unless you are one member of a class action, and that claim still exists for the other members, or if there were multiple parties (but not a class) and the case is still going on for the others, but even if this is the case, you should have been dismissed out. Typically, when an agreement is reached, the case is dismissed immediately.
It sounds like this was an employment law claim. Was it actually filed in court, or are you referring by chance, to an EEOC case that is still pending? Regardless, you should check with your lawyer, or opposing counsel if you were pro se to see why the dismissal has not been filed. You should also be able to contact the clerk to be sure the case was dismissed.